For the Calculation of EVA, Current Liabilities Are Deducted from Total

question 125

Multiple Choice

For the calculation of EVA, current liabilities are deducted from total average assets for what reason?

• A) Because liabilities are not included in assets, and so they should be deducted.
• B) Because the current liabilities are due within a one year period.
• C) Because it is necessary in order to calculate the equity of the company.
• D) Because the funds needed to pay the current liabilities will not be available to generate income in the long run.

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Definitions:

Indirect Method

This method is utilized in financial accounting to calculate cash flows from operating activities by starting with net income and adjusting for changes in balance sheet accounts.

Cash Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profit.

Cash Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profits.

Indirect Method

A cash flow statement presentation technique where net income is adjusted for changes in balance sheet accounts to calculate operating cash flow.